[OPE-L:1628] Re: Re: Re: technical change and real wages

Subject: [OPE-L:1628] Re: Re: Re: technical change and real wages
From: Ajit Sinha (ajitsinha@lbsnaa.ernet.in)
Date: Tue Nov 02 1999 - 06:22:20 EST

michael a. lebowitz wrote:

> Hi Ajit,
> Sorry for taking so long to respond. Things piling up again.


I know the feeling, Mike. I'm in a sort of similar situation.

> At 05:37 PM 10/26/1999 +0530, Ajit wrote:
> >Mike, I have two fundamental questions, and unless I have the answers to
> them I have
> >a feeling that we will keep beating about the bush. You begin your
> analysis by taking
> >a certain amount of money wages as given. My first question is, how was
> the money
> >wages determined in the first instance? Secondly, it seems to me that you
> think that
> >wages are determined ex-post, that is after the harvest the net output is
> divided
> >into real wages and profits according to the relative strengths of the two
> classes.
> >This could be okay for Sraffa's model but I have not come accross any
> reference in
> >Marx were he includes real wages in surplus. What is your reference for
> such an
> >interpretation? By the way, what is *relative* wages?
> >
> I had written that "only a rise in the *relative* wage or a fall in the
> rate of surplus value" rather than a rise in real wages implies an increase
> in the bargaining strength of the working class. Marx defined relative wage
> in "Wage Labour and Capital" as wages relative to capitalist profits so I
> was treating the two as expressions of the same situation.
> I don't think I understand why you find in my argument an ex-post
> determination of wages. It certainly isn't conscious but maybe you see it
> as implicit? As for your first question, let me try to answer it this way,
> which hopefully will bring out better the point I was trying to make here
> and in my book. Let us begin with a money wage set by class struggle,
> supply and demand in the labour market or whatever. And, let us assume it
> has been stable such that a certain set of needs that workers have been
> able to satisfy has come to be deemed as "necessary needs". So, we might
> say, then, that the value and price of labour-power are equal in this
> situation. This, I think, would correspond to your starting point.
> Now, let us introduce a productivity increase in the production of wage
> goods. We can distinguish two cases: (a) where the gain drops from the sky
> and (b) where the impetus is the result of an increase in the technical
> composition of capital-- eg., introduction of machinery in place of living
> labour. In both cases, we posit a fall in the values and money prices of
> wage goods.
> I had earlier stated:
> >> Effectively, you ask-- wouldn't money wages, however, be driven
> down by
> >> the situation in the labour market to the point where all the gains from
> >> productivity increases are captured by capital (and in the limiting case to
> >> the level of bare subsistence)? This is what I take your point about
> >> "sticky wages" to mean.
> >
> You replied:
> >I had meant that you were assuming sticky money wages, i.e. even when the
> prices of
> >wage goods change, the money wages remain the same. The question is why
> should that
> >happen?
> Considering case (a), why-- in the absence of displacement of workers by
> machinery-- would money wages fall with falling money prices of wage goods?
> There are a number of possible explanations, including:
> (1) demographic-- falling wage good prices allow increased population,
> which leads to falling wages. (We know Marx rejected that one--- in terms
> of its efficacy if nothing else.)
> (2) aggregate demand-- falling wage good prices mean workers in general
> save which means the general level of output falls; this continues until
> wages are driven down and workers spend what they get (cf. discussion in
> Grundrisse, Vintage edition, pp. 285-6). This assumes fixed needs on the
> part of worker--- Marx's working assumption in Capital.
> (3) capitalist power-- capitalists recognise that money wages can be driven
> down (presumably without reducing the reproduction of the working class)
> and therefore do so. Implicit here is that capitalists are always able to
> do so, and thus wages are at physiological subsistence plus what is
> necessary to ensure the production of workers with the desired skills.
> Common to these explanations is that there is no need to displace workers
> through machinery (and thereby to increase the degree of separation among
> them): the price of labour-power gravitates to the value of labour-power,
> and real wages remain constant despite falling prices of wage goods. In
> contrast, the argument I was making is that *once we remove the assumption
> that needs are fixed* (and further acknowledge that workers at any given
> point are not able to satisfy all their socially generated needs-- ie., are
> not at their bliss point), then ceteris paribus the effect of falling
> prices of wage goods is that workers consume more.


But Mike, you are assuming that money wages remain constant when the prices of wage
goods fall. But this assumption is what i'm questioning. Why cannot a technical change
be associated with either a fall in money wages such that the real wages remain
constant or a general monetary inflation, which keeps the real wages constant at the
given money wages? Now, as far as i understand it, both classical economics,
particularly Ricardo, as well as Marx argued that in a fast growing economy the demand
for labor may rise faster than the supply, and this leads to a rise in real wages. If
the economy keeps growing for long enough, then these high wages may become part of
the "habits" of working class consumption and become part of the value of labor-power.
But in your case, a rise in real wages come about simply due to increase in labor
productivity caused by technical change. My point is that, unless you have a theory of
wages that determines wages on the basis of labor productivity (marginal productivity
of labor or what have you), how can you make this claim? Given that you agree that the
nature of technical change is such that it creates excess supply of labor and does
nothing to increase, to say the least, the bargaining strength of the working class.

> To the extent that this
> condition prevails over time, this new set of needs realised becomes
> accepted as customary, as "necessary needs", and in this respect the value
> of labour power itself adjusts. Accordingly, productivity increases that
> drop from the sky would *not* be sufficient to lead to the generation of
> relative surplus value (although that is the way the subject is presented
> in Capital); rather, the displacement of workers via the introduction of
> machinery (i.e., case (b)), thereby driving down money wages, would be the
> necessary condition for relative surplus value. Further, I argued that the
> extent of the decline in money wages (and thus the determination of real
> wages) in this case depends upon the degree of separation among workers--
> ie., class struggle.


My argument above applies to this as well. You simply cannot assume that fall in the
prices of wage goods due to technical change would lead to a persistent rise in real
wages. You need to come up with some arguments for this proposition.

> >Usually in the real world a general inflation accomplishes what in theory
> a fall in
> >money wages would do. The point one needs to think about is on what
> account workers
> >could win higher wages when rate of unemployment is rising. The technical
> change that
> >has made the wage goods cheaper has also at the same time made the workers
> weaker by
> >throwing them out in the street.
> I think we are in agreement here. What I am not certain about, however, is
> whether in the absence of throwing workers out of work via technological
> change you see a reason for real wages not to rise if wage goods are
> cheaper--- and, if so, any of the above three explanations represents your
> position.


There is no reason for real wages to rise unless the bargaining power of the working
class improves vis a-vis the capitalist class, within the Marxist paradigm.

> >The question is why didn't these organized workers get the higher real
> wages earlier?
> >Are you saying that before the technical change the surplus was pushed to
> the minimum
> >acceptable level for the capitalists? My general sense is that you seem to
> think in
> >terms of some sort of 'social accord' that took place between the
> capitalists and the
> >workers in the 20th century in advanced capitalist countries.
> An interesting point. No, I definitely do not assume (and never have
> assumed!) a social accord, a capital-labour compromise, etc. Rather, I
> simply assume that at any given point there is a certain balance of class
> strengths (which I designate as the degree of separation of workers) and it
> is this that permits workers to get some portion of the gains from
> increases in social productivity.


Then you must come up with some hypothesis that relate class strength to labor
productivity. Up till now you have been working out on the assumption that it does.
Now, as far as i know, Marx was against relating real wages to productivity.

One last point, when you are talking about "relative wages" on a the long term or
secular time span, I think one needs to keep in mind that Marx held that the long term
tendency for the rate of profit was to fall due to the same technical changes. Cheers,
ajit sinha

> If we assume that conditions are such
> that workers cannot, then isn't that the same as assuming (as in #3 above)
> that capital is strong enough to drive the wage to physiological
> subsistence (and then some)? Why would we talk, then, about the historical
> and social element (which can rise or fall) in the value of labour power?
> But this is not a model
> >on which either Marx's theory of wages or his notion of class struggle
> works, in my
> >opinion. Cheers, ajit sinha
> agreed.
> cheers,
> mike
> Michael A. Lebowitz
> Economics Department
> Simon Fraser University
> Burnaby, B.C., Canada V5A 1S6
> Office: Phone (604) 291-4669
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